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Capital flight and foreign direct investment in Africa: An investigation of the role of natural resource endowment

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  • Léonce Ndikumana
  • Mare Sarr

Abstract

This paper aims to provide theoretical and empirical insights into the puzzling simultaneous rise in foreign direct investment (FDI) inflows in Africa and capital flight from the continent over the past decades. It specifically explores two questions: Is FDI a potential driver of capital flight? And, is natural resource endowment a possible channel for the capital flight-FDI link? The econometric analysis is based on 32 African countries over the period 1970-2013 using dynamic panel data estimation methods. Three important findings emerge from the analysis.

Suggested Citation

  • Léonce Ndikumana & Mare Sarr, 2016. "Capital flight and foreign direct investment in Africa: An investigation of the role of natural resource endowment," WIDER Working Paper Series wp-2016-58, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2016-58
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    3. Letete Emmanuel & Sarr Mare, 2017. "Working Paper 275 - Illicit Financial Flows and Political Institutions in Kenya," Working Paper Series 2392, African Development Bank.
    4. Simplice A. Asongu & Rexon T. Nting & Evans S. Osabuohien, 2019. "One Bad Turn Deserves Another: How Terrorism Sustains the Addiction to Capital Flight in Africa," Journal of Industry, Competition and Trade, Springer, vol. 19(3), pages 501-535, September.
    5. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance," Journal of Industry, Competition and Trade, Springer, vol. 17(3), pages 305-323, September.
    6. Pacific K. T. Yapatake & Gabriella M-A. M Ngaba, 2019. "Capital Flight and Extent of Corruption control in the Least Corrupt African Countries: An Empirical assessment," CEREDEC Working Papers 19/002, Centre de Recherche pour le Développement Economique (CEREDEC).
    7. Yameng Wang & Apurbo Sarkar & Linyan Ma & Qian Wu & Feng Wei, 2021. "Measurement of Investment Potential and Spatial Distribution of Arable Land among Countries within the “Belt and Road Initiative”," Agriculture, MDPI, vol. 11(9), pages 1-23, September.

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